ExxonMobil expected to supply LNG parcel next month

Islamabad: Global energy giant ExxonMobil has signed a deal with a private company in Pakistan to supply liquefied natural gas (LNG) with the government planning to gradually move out of the import business.

The agreement was signed between Universal Gas Distribution Company (UGDC) – the first private company to get gas marketing licence – and ExxonMobil in the US, a statement said on Wednesday. The first shipment of LNG is expected by the next month.

Special Assistant to Prime Minister on Petroleum Nadeem Babar termed the signing ceremony as a historic day as “ExxonMobil decided to invest in the country after a gap of twenty years”.

“The deal is an honour for Pakistan and we will promote ease of doing business to promote investment in all the sectors including the energy sector,” Babar said.

“The government wants to come out of the gas import and this deal is the first step in that direction.”

The agreement was signed in the American city of Houston between. UGDC Chief Executive Officer Ghiyas Paracha, ExxonMobil Vice President Richard Rayfield, LNG Market Development Chairman Alex Volkov, Market Development President Irtiza Sayyed, ExxonMobil Country Manager Pakistan Shahrukh Mirza, senior officials of petroleum ministry and UGDC attended the ceremony.

Petroleum adviser said investment by ExxonMobil would also propel other energy companies to invest in the country, “which would bring down the price of gas to help masses and the environment”.

“Agreement is a welcome development to trigger foreign investment, cut gas price, and improve employment opportunities,” he said. “Private gas supply will help revive the CNG (compressed natural gas) sector.”

Volkov and Sayyed said the energy company decided to invest in Pakistan after two decades with a vision to provide economical and environmentally-friendly gas to consumers on regular basis. “We will support UGDC so that it can overcome the shortage of gas in Pakistan.”

Paracha said the government has changed third party rules to allow the private sector to import gas.

“Now we will be able to buy surplus gas from terminals and also buy the fuel from five upcoming terminals which will revive the CNG sector,” he added.

“The move will increase parity between the price of CNG and petrol, fares would be reduced, one billion dollars of foreign exchange per annum would be saved, two million vehicles would be converted to CNG and foreign investment would be attracted for import of CNG kits and cylinders.”

At present, state-owned Pakistan State Oil is importing LNG equal to 600 million metric cubic feet / day (mmcfd) from Qatar. Pakistan LNG Limited has short and long-term contracts of 200 mmcfd, while remaining 400 mmcfd is secured through spot purchases. There are currently two LNG terminals with 1.2 billion cubic feet / day of re-gasification capacity.

LNG import amounted to $3.33 billion in the last fiscal year of 2018/19, up 35.96 percent compared with LNG import of $2.45 billion a year earlier.

There is a significant rise in demand of gas by domestic consumers owing to price differential vis-à-vis other competing fuels.

The Oil and Gas Regulatory Authority estimated the gas shortfall to increase to 6.6 billion cubic feet / day (bcfd) by FY2028 from the existing around 2bcfd.

Currently, natural gas is a major contributing fuel to the country’s energy mix. Its share in the primary energy mix is around 48 percent.